20020819Reply Comments of Worldcom.pdf

60PY
Dean J.Miller (ISB No.1968)
McDEVITT &MILLER LLP a ,.o
420 West Bannock Street
P.O.Box 2564-83701
Boise,Idaho 83702 gyTel.:208.343.7500
Fax:[phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF CENTURYTEL OF THE GEM STATE,INC.)Case No.GNR-T-02-11
AND CENTURYTEL OF IDAHO,INC.FOR )APPROVAL OF A TARIFF ADVICE )REPLY COMMENTS OF
CONTAINING DEPOSIT REQUIREMENTSBY )WORLDCOM,INC.
INCUMBENT LOCAL EXCHANGE CARRIERS )
FOR INTEREXCHANGECARRIERS.)
WorldCom Inc.("WorldCom"),on behalf of its regulated subsidiaries,hereby submits its
reply comments to the comments on the tariff advice proposing to change the deposit
requirements for InterexchangeCarriers ("IXCs")filed by CenturyTel of the Gem State,Inc.and
CenturyTel of Idaho,Inc.("CenturyTel")on July 12,2002 and to the reply comments of Verizon
Northwest Inc.and CenturyTel.
Verizon states that the FCC rulings on deposit provisions were issued in 1984 and 1987
when the telecommunication industrywas facing different economic regime.As AT&T stated in
its comments,the Federal Communication Commission ("FCC")has repeatedlyreaffirmed its
prescribed tariff language -and has determined that language to be sufficient in good times and
bad -to handle any risks to LECs presented by the potential for nonpayment by carriers.There
is no indication that this prescribed language has caused financial hardship for any LEC,and no
demonstrationby CenturyTelthat such hardship is likelyin the future.Thus,the additional
REPLY COMMENTS OF WORLDCOM,INC.Page 1
bases CenturyTel seeks for requiring a deposit (such as diminished credit worthiness or an
increase in gross monthly billings)are unnecessary.Furthermore,CenturyTel'sreply comments
suggests that other ILECs have seen an increase in their uncollectibles but never states that
CenturyTel'suncollectibles have increased.Therefore,the "urgency"to change its deposit
policy that CenturyTel is trying to create is unsupported.
To date,the FCC has suspended for investigation the security deposit tariffs filed by
SBC,Verizon,BellSouth,Iowa Telecom,and NECA.The FCC concluded that it has substantial
questions regarding the lawfulness of the tariffs and whether the language in the proposed tariffs
is vague,ambiguous,and is unjustand unreasonable in violation of section 201(b)of the federal
Act.The FCC found that the tariff filings required further investigation and suspended the tariffs
for five months.This Commission should suspend and investigate these tariff sheets until such
time it has reviewed the FCC's findings and conducted its own investigation.
CenturyTel states that a request for security deposit is a normal request for commercial
transaction.While WorldCom agrees a security deposit is a normal request for business
transaction,it disagrees with the method by which CenturyTelis trying to impose security
deposits on IXCs and whether such deposits should be required from IXCs.
Verizon states that ILECs'current security deposit requirements are applied on a
nondiscriminatory basis,and any changes would likewise be applied on a nondiscriminatory
basis.Verizon provides no factual support for such a statement.For example,as Qwest stated
in its comments,it currentlyhas a provision that permits it to require deposits from customers
who have a proven historyof late payments or do not have established credit.However,this
provision was not invoked in WorldCom's case'.Therefore,Qwest used its discretion as to
when a deposit is required.To the extent a company has any discretion on whether to require a
'Qwest comments at 2.
REPLY COMMENTS OF WORLDCOM,INC.Page 2
deposit,discriminatory treatment may occur.It is precisely for that reason,that clear,objective
and verifiable standards must be established for any deposit policy,whether for retail or
wholesale customers,so that a company cannot treat similar customers differentlyby granting
improper preferences.This is particularlyrelevant when many ILECs now have separate
affiliates competing with the wholesale customers of the ILEC.
While Verizon argues that CenturyTel could only require cash deposits only from those
companies that present a risk of non-payment and that CenturyTel cannot impose its tariff at
whim2,the fact is that without clear,objective and verifiable standards,CenturyTel would have
discretion and would have to make subjective evaluations under its proposed tariff on whether to
require a deposit for the reasons stated in WorldCom's opening comments.This has become
even more obvious in Oregon,where CenturyTel modified its proposed tariff language
addressing this same issue to provide some additional clarity on when deposits would be
required.However,even in the Oregon filing the standards proposed there are still inadequate,
although an improvement.The revised Oregon language filed by CenturyTelis attached as
Exhibit 1.The Oregon Commission did not approve the new CenturyTeltariff language found in
Exhibit 1 and set the matter for hearing.Accordingly,WorldCom disagrees with Verizon's
interpretation of the tariff and agrees with Staff comments and recommendation that
CenturyTel'sproposed tariff should be suspended and investigated further.3
Verizon also states CenturyTel'sproposal to impose additional security deposit
requirements is similar to other IXCs tariffs.It is clear that CenturyTel,as an ILEC,is seeking a
far higher level of protection against the risk of nonpayment than any competitive carrier could
obtain in the marketplace.Competitive carriers,such as IXCs and CLECs that have no market
2 Ÿ©TÍZOR'S Reply Comments at 3.
*Commission StaffComments at I and 2.
REPLY COMMENTS OF WORLDCOM,INC.Page 3
power,must always balance the risk of nonpayment against the risk that an overly strict security
deposit policy would drive valuable customers to a competitor.Only an incumbent carrier with
market power,whose customers have no real alternatives,could even contemplate a security
deposit policy as stringent as the one that CenturyTel is proposing.The Commission must
ensure,through the tariff review process,that CenturyTel'stariff language limits CenturyTel to a
security deposit policy that reasonably balances its interests against those of its customers.
Qwest correctly points out that the 'policy around when deposits can be required should be
carefullyconsidered to avoid unnecessary burdens on interexchangecarriers"4
The Commission Staff presented a very good point in that if CenturyTel'sdeposit
requirements are approved,then it is reasonable to assume that other ILECs will follow suite".
This onerous and burdensome deposit scheme may result in the collapse of other competing
carriers causing a tremendous turmoil in the telecommunications industry.
Verizon asserts that WorldCom confuses post-bankruptcy payments with pre-bankruptcy
security deposits.WorldCom attached the relevant order,and it speaks for itself.The order
states that each utility shall have the right to petition for reconsideration of the Order to seek an
order requiring WorldCom to provide deposits or letter of credit,or prepay for future Utility
Services.Also,in the event of a payment default for post petition Utility Services,a Utility
Company may seek appropriate action under any applicable tariff or regulation,provided
however,that such action is without prejudice to WorldCom's right to seek injunctionrelief from
this Court.There is no doubt that CenturyTel'stariff application is superceded by Order of the
United States BankruptcyCourt.
WorldCom disagrees with Verizon's comment that with CenturyTel'sproposal,an ILEC
can better ensure that the IXC continues to pay for the services it receives rather than default on
4 QWest Comments at 1.
*Commission Staffcomments at 2.
REPLY COMMENTS OF WORLDCOM,INC.Page 4
such payments and thereby transfer the responsibility for them to someone else.First,
CenturyTel'sproposal is not an insurance that an IXC or any other carrier will continue to pay
for the services it receives if its finances are already strained.Secondly,if all ILECs across the
nation demand up-frontpayments from already cash strapped carriers simultaneously,it may
accelerate that carriers cash burn rate to the point where bankruptcy filing may be inevitable.
Finally,in the event a carrier files for protection under the bankruptcy laws,any deposits
which that carrier has provided will,in all likelihood,be treated as assets of the bankrupt's estate
subject to claims by creditors.Accordingly,deposits held could not be applied to pre-petition
debts without bankruptcy court approval.
As WorldCom has stated,there is no legal,factual or policy support for CenturyTel's
proposal.CenturyTel'sconcerns cannot override the needs of customers,others with whom
WorldCom does business,or even WorldCom itself.WorldCom requests that the Commission
suspend CenturyTel'sproposal permanently.
Dated this day of September,2002.
WorldCom,Inc.
By:
Dean J.Miller
Attorneyfor WorldCom,Inc.
Susan Travis
WorldCom,Inc.
707 17th Street,Suite 4200
Denver,CO 80202
REPLY COMMENTS OF WORLDCOM,INC.Page 5
CERTIFICATEOF SERVICE
I hereby certify that on the 19th day of September,2002,true and correct copies of the foregoing Reply
Comments of WorldCom,Inc.,were forwarded,with all requiredcharges prepaid,by the method(s)indicated to the
following:
Pamela Donovan Hand Delivered O Mary S.Hobson Hand Delivered
CENTURYTELOF THE GEM STATE Federal Express ,STOEL RIVEs LLP Federal Express
P.O.Box 9901 U.S.Mail 101 So.Capitol Boulevard,U.S.Mail
805 Broadway Telecopy Suite 1900 Telecopy
Vancouver,Washington 98668-8701 Boise,Idaho 83702
Mark P.Trinchero Hand Delivered Gail Long Hand Delivered
DAvis WRIGHTTREMAINELLP Federal Express TDS TELECOM Federal Express
1300 SW 5 Avenue,Suite 2300 U.S.Mail P.O.Box 1566 U.S.Mail
Portland,Oregon 97201 TelecopY Oregon City,Oregon 97045-1566 Telecopy
Lance Tade Hand Delivered O Ted Hankinss Hand Delivered
CITIZENS TELECOMMUNICATIONS Federal Express ¯CENTURY TELEPHONE ENTERPRISEs Federal Express
4 Triad Center,Suite 200 U.S.Mail P.O.Box 4065 U.S.Mail
salt Lake City,Utah 84180 Telecopy 0 Monroe,Louisiana 71211-4065 Telecopy
Morgan W.Richards,Jr.Hand Delivered 0 Conley Ward,Esq.Hand Delivered
MOFFATTTHOMAs Federal Express O GIVENs PURSLEY LLP Federal Express
101 So.Capitol Boulevard,10th Floor U.S.Mail 277 North 6 h Street,Suite 200 U.S.Mail
P.O.Box 829 Telecopy P.O.Box 2720 Telecopy
Boise,Idaho 83701-0829 Boise,Idaho 83702-7720
Allan T.Thoms Hand Delivered Rebecca DeCook Hand Delivered
VERIZON Federal Express AT&T COMMUNICATIONSOF THE Federal Express
17933 NW Evergreen Parkway U.S.Mail MOUNTAINSTATEs U.S.Mail
P.O.Box 1100 Telecopy 1875 Lawrence Street,Room 1575 Telecopy
Beaverton,Oregon 97075 Denver,Colorado 80202
Gregory Rogers Hand Delivered Brian Thomas Hand Delivered
LEVEL 3 COMMUNICATIONSINC.Federal Express TIMEWARNER TELECOM Federal Express
1025 Eldorado Boulevard U.S.Mail 223 Taylor Avenue North U.S.Mail '
Broomfield,Colorado 80021 Telecopy O Seattle,Washington 98109 Telecopy
Walter Blackwell Hand-Delivered 0 Thomas].Moorman Hand Delivered
Assoc.oF COMMUNICATIONSENTERPlUSEs Federal Express O KRASKIN LESSE&COSSON Federal Express
1401K Street NW,Suite 600 U.S.Mail 2120 L Street,NW,Suite 520 U.S.Mail
Washington,D.C.20005 TelecopY O Washington,D.C.20037 Telecopy
Dated this 19th day of September,2002.
09/20/02 INI 09:29 FAI 303 291 6333 MCI WESTERN PUBLIC POLIC ->-+-Joe Miller 002
Wacouve¿;¡MA 98668-870)
August 12,2002 CENRYTEL
Oregon Public UtiÙtyCommission
.550 Capitol Street,N.E.,Suite 215
Salem,OR 97301-2551
Attention:Janice Fulker,Administrator
Tariff and Data Analysis ,
Tariff Advice No.237,Supplement ACenturyTelofOregon,Inc.
Commissioners:
CenturyTel of Oregon,Inc.herewith submits for Commission approvalan original and four
copies of the followingrevised tariff pages:
TarifÉ ËUC OR AC.4
ACCESS SERVICE
First Revised Page 41,cancels OrigimiPage 41
.Original Page 41.1
Original Page 41.2
The purpose of this filing is to Supplement the fûing for a modification of the deposit requirements.
The Company and the Commission staff have negotiatedthese proposed language revisions to the
original tariff filing..·
CenturyTel hereby requests review and approvalby the Commission of this tariff filing,with aneffectivedateofAugust21,.2002 as requested by our letter to modify the oriemity proposedeffectivedate.
A request for Less Than Statutozy Notice (LSN)formis also provided.
Please direct any inquiries conceming this filingto me at [phone].
Sincerely,
Pamela Donovan
Supervisor,Tariffs
Reply Comments of WorldCom,Inc.Exhibit 1 -Page 1 of 9
Case No.GNR-T-02-11-
va.,>v ru aua asi baaa ati WESTERN PUBLIC POLIC 444 Joe Miller 003
BEFORE THE PUBLIC UTILITY COMMISSION0F OIŒGON
550 CAPITOL STREET,NESALEM,OR 97310-1380
IN THE MATTER OF THE APPLICATIONOF)UTK.lT'l L.S.N.APPLICATIOÑ
CenturyTelof Oregon,Ine-)NO.
TO WAIVß STATUTORYNOTICE )
NCrfE:ATTACH EXHIBrTIF SPACE INSUFFICIENT
1.GENERAL DESCRIPTION OF THE PROPOSEDSCHEÞULE(S)ADDITION,DELETION,ORCHANGE:(SCHEDULE INCLUDES ALL RATES,TOLLS AND CHARGES FOR SERVICEANDALLRULESANDREGULATIONSAFFECTINGTHESAME)
Transmittal237 was filed on July 12,2002 to change the deposit requirementin Tarif 0regon P.U.C.AC4.
2.APPLICANT DESIRES TO CHANGE THE SCHEDULE(S)NOW ON FILE KNOWN ANDDESIGNATEDAS:QNSERT SCHEDULE Rik bKENCE BY NUMBER,PAGE,AND ITEM)
Original Page 41;Original Page 4LL .
The Section on all pages is 2.4.1 Paym¢nt of Pates,Chargesand D¢posits (A)Deposits
3.THE PROPOSED SCHEDULE(S)SHALL BE AS FOLLOWS:(INSERT SCHEDULEREFERENCEBYNUMBER,PAGE AND ITEM)
First RevisedFage 41 cancels Original Page No.41;Original Page 41.1;Original Page 41.2TheSectiononallpagesis2.4.17ayment of Rates,Chargesand Deposits (A)Deposits;
4,REASONS FOR REQUESTlNO A WAIVEROF STATUTORYNOTICE:
To implement carrected deposit languagewithinthe requestedeffective date of August 21,2002,.
5,REQUESTED EFFECTIVEDATE OF THE NEW SCHEDULE(S)OR CEANGE(S):
August 21,'É002.
PUC1]SE.ONLY
EFFECTIVEDATE OF APFROVEDSCHEDULE(S)OR CHANGE(5)APPROVED DENIED
AI.r OREZED STONATUR.E DATE
Reply Comments of WorldCom,Inc.
Exhibit 1 -Page 2 of 9
.Case No.GNR-T-02-11
o.o rax aua 231 eaaa au REMERN PUBLIC POLIC ++-+Joe Miller 004
Oregon P.U.C.AC4 First Revised Page 41 .Cancels Original Page 41
CENTURYTEL OF OREGON,1NC.
ACCESS SERVICE
2.General Regulation;(Cont'd)
2.4 Pavmentgngements and Çredit Allowaneen (C)2.4,1 Pavment of Rates,Charges ar¡dpep ¢ts(A)Deposits
In order to safeguardits interests,the Telephone Company reserves the right to requite thecustomertosecureitsaccountpoortotheestablishmentofservice,the installation of newservice,the transfer of an existmg service,and/or at any time after the provision of serviceintheformofacashdepositasdescribedbelow.Such security deposit will not exceed anamountequaltotheestimatedtotalratesandchargesfortheservices(s)orderedfor a two-month period as describedbelow.A security deposit or additional security deposit may berequiredkomanewor¢xisting customer when:,
1)the customer has a proven history of late payments to the Telephone Company or the-customer does not have established credit.A proven history of late payments exists if thecustomerhasfailedtopaytwomonthlybillsbythebillduedatewithina12-monthperiodoftime.If the customer Eas a history of late payments or has not demonstrated establishedcredit,the Telephone Company may require the customer to pay up to a two-month depositbasedonamonthlyavengeofthetotalchargesbilledandrenderedbytheTelephoneCormanyforthemostrecentthreemonthpenod.If the customer has not received threemonthsofservicefromtheTelephoneCompany,the two-month deposit will be based onchargesestimatedbytheTelephoneCompanyfortheinitialtwo-month period.
2)the customer's gross monthly billing has increased beyond the amount initially used toestimatethecustomer's current scourity deposit by a factor of ten percent.The additionalsecuritydepositrequíredunderthissectionshallnotexceedtheamountrequiredtoestablishuptoatwo-month deposit based on a monthly average of the total cEarges billed andrenderedbytheTelephoneCompanyforthemostrecentthreemonthperiod.
3)the Telephone Company becomes aware that the customer's credit worthiness has fallenbelowcommerciallyacceotablelevelsasdeterminedbyanindep¢ndent credit rating orrepoit'service.Should the customer's credit worihmess fau below commerciallyacceptabelevels,the customer shall be regune'd to pay up to a tw>month deposit based onamonthlyaverageofthetotalchargesbilledandrenderedbytheTelephoneCompanyforthemostrecentthreemonthperiod.Credit worthiness shall be defined to have fallen belowcommerciallyacceptablelevelsinanyofthefollowingsituations:
(a)if any debt scourities of a customer or its parent (defined as an entity that owns an equitymterestmmorethan50%of the customer)are below investment grade,as defmed by thgSecuritiesandExchangeCommission(See 17 C.F.R.§239.13);
(b)if any debt securities of a customer or its parent are rated below the lowest investmentgradebyanatíonallyrecognizedcreditratingorganization,or are put on review by.such aratmgsorgamzationforapossibledowngrade;
(i)The Company would use Standardand Poors or anothernationally recognized rating .agency.Customers would be expected to m2intain a rating of a BBB,or equivalent ratmg,as the measure ofa Customer's credit worthiness;or (C)
Material moved to Page 41.1
Tatiff Advice Nö.:237,SupplementAIssued:July 12,2002 Effective:August 21,2002Issuedby·CentoryTel of Oregon,Inc.By·Pamela Donovan Title:Supervisor,Tariffs
Reply Comments of WorldCom,Inc.Exhibit 1 -Page 3 of 9
Case No.GNR-T-02-11
orzo,va r:u va:,>u PAA 303 291 6333 MCI WESTERN PUBLIC POLIC +4 Joe Miller 005
Oregos P-U.C.AC4 i;-cal Fage41.1
CENTURI"TEL OF OREGÓN,INC.
ACCESS SERV1CE
2.General geaulations (Cont'd)2.4 Pavment Arrannements and Credit Allowances (Cont'd)(C)2.4.1 Pavment ofRates,Çhargesand Deposits (Cont'd)(Ay Deoosits (Cont'd)2 (Cont'd)(c)if the customer does not have outstanding securities Tated by a nationally recognizedcreditratingorganization,and the customeris rated,
(i)"fairN Or beIow in a compositecredit appraisalpublishedby Dun and Bradstreet,or
(ii)"high risk"in a Paydex score as published by Dun and Bradstreet.
(d)if the customer or its parent informs the Telephone Company or publicly states that it isunabletopayitsdebtsassuchdebtsbecomedue.
(e)if the customer or its parent has commenced a voluntary receivership or bankruptcyproceeding(or had a receivership or bankruptcy proceeding nuttated against it).
The Telephone Company wiß provide the customer written notice electronically or byCertifiedU.S.Mail (retttm receipt requested)if a deposit is reguired underthis section.Thewrittennoticewillprovidethefollowmginformation:a)explamthe criterion set forth aboveusedtodeterminethatthecustomerhasimpairedomditworthiness,b)direct the customer topaythedepositwithinfourteen(14)days of the date the written notice is sent to,or madeelectronicallyavailableto,the customer.In the event an existing customer fails to Temit adepositrequiredunderthissection,service(s)to that customer may be discontinued inaccordancewiththetermsspecifiedinSection2.1.8(A)·and 2.1.8(B),preceding.
If pursuant to this section,the Telephone Comoany requests a security deposit from anexistingcustomerthathasanytermplancommitmentinplaceandsuchexistingcustomeracceptstheconditionthatcontinuationofitsservice(s)is contingent upon its provision to the .Telephone any of the requestedsecurity denosit,then the regulätions specified in thissectionwilltothecustomerforthetemainBeroftheterrnpTancommitmenttowhichthecustomersscribes.
.Tariff Advice No.:237,Supplement A ·
Issued:July 12,2002 Effective:August 21,2002IssuedbyCenturyTelofOregon,Inc.
By:Pamela Donovan Title:Supervisor,Taxiffs
ur Reply Comments of WorldCom,Inc.Exhibit 1 -Page 4 of 9
Cáse No.GNR-T-02-11
09nu/UX mi 09:31 FAX [phone] MCI WESTERN PUBLIC POLIC 44->Joe Miller 006
Oregon P.U.C.AC4 .Original Page 41.2
CENTURYTEL OF OREGON,INC,
ACCESS SERVICE
2.General Regulations (Cont'd)
2.4 Payment Arrangements M4 Credit Allowances (Cont'd)
2.4.1 Payment of Rates,Chames and TJenosits (Cont'd)(A)Deposits (Cont'd)(C)
If pursuant to this section,the TelephoneCompany requests a security depositfrom anexistingcustomerthathasanytermplancommittnentinplaceandsuchexistingcustomerreiectstheconditionthatcontínuationofitsservice(s)is contingent upon itsprovisiontotheTelephoneCompanyoftherequestedsecuritydeposit,then upondiscontinuanceofthecustomer's service(s)and the resulting terzeirration of the
associated term plan commitment(s),the TelephoneCompanywill waive theapplicable.termination liability charge(s)for each such termplan commitmentterminated.
The fact that a deposit has been made in to way relieves the customer from complyingwiththeTelephoneCompany'sregulations as to the prompt paymentof bills.
At inch time as the provision of the serviceto the customer is terminated,the amountofthedepositwillbecreditedtothecustogs'account and any creditbalance which
may remain will be refunded.Such a deposit will be refunded er creditedto the
account of an existing customer when the customer has established commerciallyacceptablecreditasdefinedaboveand/or has established a one-yearprompt paymentrecord.For the period the deposit is held by the TelephoneCompany,the.custorherwillreceiveinterestthelawf'uIrate as specified by state statute or 7 percent simpleinterestperannumifnorateisspecified.
The rate will be applied for the number of days from the date the customer deposit is
.-.received by the TelephoneCornpanyto and including the date such depositis credited
to the customets account or the date the deposit is refundedby the TelephoneCompany.Should a depositbe credited to the customets account,'as indica.ted.above,no interest will accrue on the depositfrom the date such deposit is creditedto the
customer's account.-(C)
Tariff Advice Ño.:237,Supplement A
Issued:July 12,2002 Effective:August 21,2002
Issued by:CenturyTel of Oregon,Inc.
By:PamelaDonovan .Title:Supervisor,TaritTs
.Reply Comments of WorldCom,Inc.Exhibit 1 -Page 5 of 9
Case No.GNR-T-02-11 .
vo.«ra Juo 3 6 3 act wtSTERN PUBLIC POLIC Joe Miller 007
CenturyTel of Oregon Advice No.237August13,2002
Page 2
access serlice customers,the Company has proposed more stringent security depositregulationstobettermanagethecreditrisk.The proposed language allows for theimpositionofasecuritydepositundere×pandedandmorewell-defined circumstancesincludingwhenanexistingcustomerfallsbelow"commercially acceptablecreditworthiness".Assuming diligent credit monitoring on the part of CenturyTel,theproposedrevisedlanguageallowstheCompanytoimposeasecuritydepositrequirementonfinanciallytroubledcystomersbeforeapotentialbarikruptcyfilingorpaymentdefault.
A.FCC Activity on this issue
CenturyTel's request for stricter access service securitydeposit requirementsis the firstofitstypetobefiledwiththeOregonCommission.However,Bell South,SouthwestemBell(SBC),Verizon and the National Exchange Carriers Association (NECA)have allfiledsimilarrequestswiththeFCCinthepasttwomonths.'Historically,securitydeposittarifflanguageatboththestateandfederallevelhavelimitedtheabilityoflocalexchangecarrierstoimposesecuritydepositrequirementsonaccessservicecustomerse×ceptincircumstanceswhenanexistingaccessservicecustomerhasapoorpaymenthistoryoranewaccessseivicecustomerhasnoestablishedcredit.ThelargenumberofsecuritydeposittarifffilingsbyincumbentLECsattheFCCisadirectresultofthelimitationsirilposedbytraditionalaccessservicetariffsinthefaceofincreasingfinancialturmoilonthepartofinterexchangecarriersthroughouttheindustry-in particularthe Chapter 11 bankruptcyfiling of Worldcom on July 21,2002.-
As might be imagined,the proposed changes in security deposlt tariff regulations havebeenthesourceofcontroversywithallofthefederalfilingsandopposedbyintere×changecarriers.The multitudeof objections posed by the interexchangecarriersaretoovoluminoustodiscussinthismemorandum.However,one recurring themeisthattheproposedtariffchangesareunnecessarilyvagueandfailtousewell-defined,objective criteria for defining the credit worthiness of access service customers.ThiswasStaff's primary objection to CenturyTel'soriginal filing with the Commission and thereasonStaffinsistedontheextensivemodificationsincorporatedintheCompany'srevisedfilingasdiscussedbelow.To date the FCC has not ruled on any of the
*CenturyTel also filed a request with the FCC to revise its federal network access security deposit language.CenturyTefs filing with the FCC was similar to original TariffAdvice No.237 filed with the Oregon Commisslon onJuly12,2002.The Company has since withdrawn its federal filing pending the outcome of FCC decisions on the BellSouthfilings,et at..
The majority of Staffs suggested modifications were based on SBCs proposed revisions to its federal accessservicesecuritydepositrequirements.SBC's proposed tariff language,filed with the FCC on August 2,2002,can becharacterizedasfarmoredetailedthansimilarfilingsby,for examçife.Bell South and NECA .
.Reply Comments of WorldCom,Inc.Exhibit 1 -Page 6 of 9
Case No.GNR-T-02-11
ve au -==va.»ru 303 291 6323 MCI WESTERN PUBLIC POLIC -++->Joe Miller 008
CenturyTel of Oregon Advice No.237August13,2002
Page 3
proposed tariff changes.At present,the Bell South,NECA and Verizon filings are in thereplycommentphaseoftheFCCregulatory°process.6
B.Basis for Staff's Recommendation
Staff's recommendation to approve CenturyTel's proposed revised security depositregulationsisbasedonthefollowingkeyfactors:
1.The current financial turmoil in the telecommunications industry has subjected allcarriers,both local and interexchange,to significantly higher credit risk.It isappropriateforlocalexchangecarrierstoimposestrictersecuritydepositrequirementsinanefforttobettermanagethecreditriskposedbyfinanciallytroubledinterexchangecarriers.CenturyTel of Oregon,had interstate and stateaccessrevenuesofapproximately$12.9 million for the year ending December 31,2001.Access revenues accounted for approximately 18.6 percent of theCompany's total revenue of approximately $69 million during this same period.Therefore,the magnitudeof the potential problem is not insignificant.
2.As a result of Staff's suggestions,CenturyTel's proposed revised languagefeatureswell-defined limits on the Company's ability to require security deposits from newandexistingcustomers.Staff believes these limits strike a reasonable balancebetweentheCompany's need to reduce credit risk with the need of interexchangecarrierstoobtainswitchedandspecialaccessserviceunderreasonabletermsandconditions.The limits required by Staff that the Company incorporatád in itsproposedrevisedlanguageinclude:
a.The inclusion of language that specificallydefines "an established history of latepayments"as a failure to pay two monthlybills by the bill due date within a 12-month period.Both CenturyTel's e×isting and originally proposed revisiongprovidednosuchdefinition.
b.A limitation of securitydeposit requirementsto a maximum of two months.ThisrequirementisunchangedfromCenturyTel'sexisting.regulations.
c.A detailed definition of "commertially acceptable credit worthiness"thatreferencesspecificcriteriausedbynationallyrecognizedcreditrating
'Verizon also fled a pleading with the FCC on July 24,2002 styleti as a "Peddon for Emergency Declaratory OnderandOtherReliet"in which It asks the FCC to address issues regarding tariff revisions io ensure against nonpaymentandtheablutyoflocalexchangecarrierstoobtalnpaymentforseMoesrenderedtocustomersinbankruptcy.InitialcommentsassociatedwithVerlzon's petition are due on August 15,2002 and reply comments are due on August 26,2002.
Reply Comments of WorldCom,Inc.Exhibit 1 -Page 7 of 9
-Case No.GNR-T-02-11
09/o u..riu va:n re duo ZUI 6333 ¾CI WESTERN PUBLIC POLIC -4 Joe Miller 009
CenturyTel of Oregon Advice No.237
August 13,2002
Page 4
organizations such as Standard &Poors and Dunn and.'Bradstreet.
=CenturjTel'soriginallyproposed revisions contained no such definition.
d.A requirement that existing cystomers who already provide a security depositcanonlyberequiredtoincreasethatdepositiftheiractualmonthlybillingsgrowbyafactorof10percentabovetheamountusedtoestablishtheirexistingsecuritydeposit.CenturyTel'soriginally proposed revisions contained no suchdefinition.
e.A requirementthat CenturyTelgive access service customers fourteen days toprovideasecuritydepositwhenrequestedbytheCompany.CenturyTelis alúorequiredtoexplainthecriterionusedtodeterminewhenacustomerhasimpairedcreditwodhiness.Neither of these items was contained in theCompany's originally proposed revisions.
f.Maintenance of the 30-day access service termination notice requirement ascontainedintariffSections2.1.8(A)and 2.1.8(B).These regulations preventCenturyTelfromimmediatelyterminatingserviceifacustomerdoesnotpayasecuritydepositwithinfourteendaysafterbeingrequestedbytheCompany.
OPTIONSFOR COMMISSIONACTION:
The Commission has two basic options for action:
1.Approve CenturyTel'sproposed access service tariff language as recommended by
Staff.Such an approval will presumablÿcause CenturyTel's tariff languageto serve
as a model for other Oregon local exchange carriers who desire to make similar
-filings.
2.Investigatethe issue in greater detail.This can be accomplished by suspendingthe
filing under ORS 759.185,Suspension of Rates Pending Hearing;Time Limitat¡on;Revenue Collected Subject to Refund;Interirn Rates.This option will have the
.advantage of allowing the Commission to incorporate FCC regulatory actions intothe.Oregon decision making process.However,selecting this option has the
potential to subjecting CenturyTel to an increased risk of uncollectible access
service revenue from financiallydistressed interexchange carriers.
Given what Staff believes are the well-defined and reasonable requirements of
CenturyTel'sproposed tariff changes Option #1 is recommended.
Reply Comments of WorldCom,Inc.Exhibit 1 -Page 8 of 9
.Case No.GNR-T-02-11
us -u us:az va Jua zu una ELI WESTERN PUBLIC POLIC Joe Miller 010
CentoryTel of Oregon Advice No.237August13,2002
Page 5
PROPOSED COMMISSION MOTION:
CenturyTel's August 12,2002 revised Advice No.237 be allowed to go into effect onAugust21,2002.
CenturyTel Advice No.237
Reply Comments of WorldCom,Inc.Exhibit 1 -Page 9 of 9
Case No.GNR-T-02-11